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on Central and Western Asia |
| By: | Cem Çakmaklı; Selva Demiralp; Ṣebnem Kalemli-Özcan; Sevcan Yesiltas; Muhammed A. Yildirim |
| Abstract: | The COVID-19 crisis has the potential to turn into the biggest emerging market (EM) crisis since 1980s. We quantify the macroeconomic effects of COVID-19 for a small open economy by calibrating a SIR-multi-sector-macro model to Turkey. We measure sectoral supply shocks utilizing teleworking and physical job proximity, and sectoral demand shocks with credit card purchases. Both shocks are also affected from changing infection rates under different lockdown scenarios. Our results show that the optimal policy, which yields the lowest economic cost and saves the maximum number of lives, can be achieved under a full lockdown. Being an open economy amplifies the economic costs through two main channels. First, the demand shock has domestic and external components. Second, the initial shock is magnified due to domestic and international input-output linkages. The policy options are limited given the low fiscal space to fight the pandemic and urgent external finance needs to rollover the foreign currency debt. We draw parallels between the policies employed during 2001 crisis in Turkey and discuss pros and cons of policy options to deal with the economic fallout from COVID-19. |
| JEL: | E01 F23 F41 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27191&r=all |
| By: | Saeed Ghasseminejad; Mohammad R. Jahan-Parvar |
| Abstract: | This study provides a detailed analysis of the impact of financial sanctions on publicly traded companies. We consider the effect of imposing and lifting sanctions on the target country's traded equities and examine the differences in the reaction of politically connected firms and those without such connections. The paper focuses on Iran due to (1) its sizable financial markets, (2) imposition of sanctions of varying severity and duration on private and state-owned companies, (3) the significant presence of politically connected firms in the stock market, and (4) the unique event of the 2015 nuclear deal, resulting in fairly rapid lifting of a sizable portion of imposed sanctions. We find that sanctions affect politically connected firms more than ordinary firms, have lasting negative effects on profitability ratios, and that politically connected firms stock prices bounce back more slowly after removal of sanctions. Firms targeted by financial sanctions decrease their leverage and increase their cash holding to manage their perceived increase in risk profile. |
| Keywords: | National security; Financial sanctions; Political connections; Event study; Capital structure; Iran |
| JEL: | D74 F51 G32 G39 H56 |
| Date: | 2020–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1281&r=all |